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Medical
Savings Accounts
How
They Work
With a Medical
Savings Account (MSA) you divide the money you would normally spend
for full coverage health insurance into two parts:
Part One
You buy a much
lower cost medical insurance plan to cover big medical bills, for
instance medical bills above $4,950.
Part Two
You put the
rest of the money you'd normally spend on health insurance into a
100% tax-deductible personal savings account. This money belongs to
you; what you don't spend is yours to keep.
You can pay
the insurance deductible and copayments from this account -- or
simply save it.
Prior to
1997, if you did the same thing
Part Two was not
tax deductible at all. You paid taxes on all the money
personally used for medical expenses.
Because this
is such a big tax break for you, the law limits your tax-exempt
savings deposits to 75%) of the one-year deductible (65% for single
persons). You can put that much aside each and every year.
If you choose
a family deductible of $4,950, you can save $3,712.50 every year.
You Can
Save It With Tax-Exempt Interest
You can save
what you don't spend on medical care. You can invest your savings
earning tax-exempt interest accumulation.
High
Deductible Insurance
How
Medical Savings Account Money Can Be Used
Key
Details of the Medical Savings Account Law
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